La Jolla Pharmaceutical: Back from the brink

Point Loma  In March 2010, La Jolla Pharmaceutical Co. appeared ready to go out of business, after investors rejected its proposed merger with another local biotech, Adamis Pharmaceuticals.

The company laid off nearly all of its staff and its shares were delisted from Nasdaq — consequences of the failure of Riquent, its drug to treat lupus. The company had said that without a merger partner, it would probably fold.

That didn’t happen. La Jolla Pharmaceutical today is small compared with its heyday in the early 2000s. But it’s actively in business, testing one drug in the clinic and preparing to launch trials of another.

The contrast between then and now is striking. In 2009, La Jolla Pharmaceutical had 100 employees; today as a “virtual biotech,” it has four employees. Its shares trade over the counter for 8 cents; at their peak in 2001, shares reached $50. Its market value of $2.3 million puts the company near the bottom of what’s called the “nanocap” sector.

The company operates with a minimum of employees and overhead to direct as much money as possible to drug development, said Chief Executive George Tidmarsh, M.D., who joined the company in January 2012. To support its program, the company has gotten funding from private biotech investors.

On Monday, the company said it had treated the first patient in a Phase 2 trial of its drug for chronic kidney disease, called GCS-100. And in the third quarter, the company plans to start clinical trials of another drug, LJPC-501, for a liver-kidney disease called hepatorenal syndrome.

La Jolla Pharmaceutical’s persistence was news to veteran Diego stock watcher Bud Leedom. After a quick look at its financials, Leedom said he was favorably impressed by La Jolla Pharmaceutical as a company, but not necessarily as an investment.

As a company, La Jolla Pharmaceutical benefits from Tidmarsh, who has racked up entrepreneurial credentials with other companies, said Leedom, president of Leedom Asset Management.

“You’ve got somebody who has some wherewithal,” Leedom said.

But even if the company succeeds, he said, average investors won’t get much.

“It’s trading at 8 cents a share for a reason,” Leedom said. “New shareholders of the company right now do not have a very large stake in the company.”

Holders of preferred shares control 99.9 percent of the company, Leedom said, leaving just 0.1 percent for holders of common shares. These preferred shareholders recapitalized the company after its crisis, Leedom said, but the equity stake of existing common shareholders was nearly eliminated.

Meanwhile, erstwhile merger partner Adamis Pharmaceuticals has pursued its own independent path. Adamis raised $6.5 million in a private placement, it announced on July 1.

Adamis, whose shares also are traded over the counter, is developing several drugs, including an epinephrine syringe for anaphylaxis, which is a life-threatening severe allergic reaction, along with drugs for chronic obstructive pulmonary disease and asthma. Its Adamis Therapeutics division is researching therapeutic vaccines for cancer.